To amend sections 4735.53, 4735.58, 4735.70, 4735.71, and 4735.72, to enact new sections 4735.56 and 4735.57 and section 4735.181, and to repeal sections 4735.56, 4735.57, and 4735.73 of the Revised Code to modify agency relationships between real estate licensees and customers, including disclosures made to customers, and to establish a penalty for noncompliance with disclosure requirements.

Section 1. That sections 4735.53, 4735.58, 4735.70, 4735.71, and 4735.72 be amended and new sections 4735.56 and 4735.57 and section 4735.181 of the Revised Code be enacted to read as follows:

Sec. 4735.181. (A)(1) It shall be a violation of division (A)(9) of section 4735.18 of the Revised Code if any individual licensed as a real estate broker or salesperson pursuant to this chapter fails to comply with section 4735.55, 4735.56, or 4735.58 of the Revised Code or any rules adopted under those sections.

(2) When the superintendent determines that a violation of division (A)(9) of section 4735.18 of the Revised Code has occurred because a licensee has failed to comply with section 4735.55, 4735.56, or 4735.58 of the Revised Code or any rules adopted under those sections, the superintendent may do either of the following:

(a) Initiate disciplinary action under section 4735.051 of the Revised Code for a violation of division (A)(9) of section 4735.18 of the Revised Code, in accordance with Chapter 119. of the Revised Code;

(b) Personally, or by certified mail, serve a citation and impose sanctions in accordance with this section upon the licensee.

(B) Every citation served under this section shall give notice to the licensee of the alleged violation or violations charged and inform the licensee of the opportunity to request a hearing in accordance with Chapter 119. of the Revised Code. The citation also shall contain a statement of a fine of up to two hundred dollars per violation. All fines collected pursuant to this section shall be credited to the real estate recovery fund, created in the state treasury under section 4735.12 of the Revised Code.

(C)(1) If any licensee is cited three times under this section within twelve consecutive months, the superintendent shall initiate disciplinary action pursuant to section 4735.051 of the Revised Code for any subsequent violation that occurs within the same twelve-month period.

(2) If a licensee fails to request a hearing within thirty days of the date of service of the citation, or the licensee and the superintendent fail to reach an alternative agreement, the citation shall become final.

(D) Unless otherwise indicated, the licensee named in a final citation under this section must meet all requirements contained in the final citation within thirty days of the effective date of that citation.

(E) The superintendent shall suspend automatically a licensee's license if the licensee fails to comply with division (D) of this section.

Sec. 4735.53.  (A) The types of agency relationships a licensee may establish in a real estate transaction are limited to the following:

(1) An agency relationship between the licensee and the seller;

(2) An agency relationship between the licensee and the purchaser;

(3) A dual agency relationship between the licensee and both the seller and the purchaser;

(4) A subagency relationship between the licensee and the client of another licensee.

(B) When an agency relationship is formed between a licensee and a client, both all of the following apply also are considered the agent of that client:

(1) The brokerage with whom the licensee is affiliated and, except as provided in division (C) of section 4735.70 of the Revised Code, the management level licensees in that brokerage who have direct supervisory duties over licensees are also agents of that client;

(2) Any licensee employed by, or affiliated with, the brokerage who receives confidential information from the agent of the client is also an agent of that client;

(3) Any other licensee in the brokerage who assisted in establishing the agency relationship;

(4) Any licensee in the brokerage who specifically is appointed with the client's consent to represent that client.

(C) Except as otherwise provided in divisions (B)(1) and (2) to (4) of this section, another licensee who is affiliated with the same brokerage as the licensee is not an agent of that client unless that licensee assisted in establishing the agency relationship or is specifically appointed, with the client's consent, to represent the client.

(C)(D) A payment or the promise of a payment to a licensee does not determine whether an agency relationship has been created between a licensee and a client or between other licensees in the brokerage with which the licensee is affiliated and that client.

Sec. 4735.56. (A) Each brokerage shall develop a written brokerage policy on agency to be given to prospective sellers and purchasers in accordance with divisions (C) and (D) of this section.

(B) The brokerage policy on agency described in division (A) of this section shall include all of the following information:

(1) An explanation of the permissible agency relationships available under section 4735.53 of the Revised Code and the duties that the agent owes their client;

Sec. 4735.57.  (A) The superintendent of real estate, with the approval of the Ohio real estate commission, shall establish by rule the agency disclosure statement. The agency disclosure statement shall contain a place for the licensee and the parties to the transaction to sign and date the statement and shall contain sections for the disclosure or explanation of all of the following:

(1) Unless confidential, the names of all the parties in the transaction;

(2) The address of the property being sold or leased;

(3) The name of the licensee or licensees and the brokerage with which each licensee is affiliated;

(4) The party that each licensee in the named brokerage represents in the transaction;

(5) If two licensees affiliated with the same brokerage represent the purchaser and the seller, whether each licensee represents their separate client or are acting as dual agents;

(6) If only one licensee is involved in the transaction, whether that licensee is a dual agent or represents only one party to the transaction;

(7) If both the purchaser and the seller are represented by licensees affiliated with the same brokerage, that the brokerage is a dual agent;

(8) That the signature of the client indicates the client's informed consent to the agency relationship and that if the client does not understand the agency disclosure statement, the client should consult an attorney.

(B) On the reverse side of the agency disclosure statement, the duties of a licensee acting as a dual agent shall be specified and contain sections disclosing all of the following:

(1) An explanation of the nature of a dual agency relationship, including a statement that in serving as a dual agent, licensees in the brokerage represent two clients whose interests are, or at times could be, different or adverse;

(2) That as a result of the dual agency relationship, the dual agent may not be able to advocate on behalf of the client to the same extent the agent may have if the agent represented only one client.

(3) A description of the duties the brokerage and its affiliated licensees and employees owe to each client, including the duty of confidentiality;

(4) That neither the brokerage nor its affiliated licensees have any material relationship with either client other than incidental to the transaction, or if the brokerage or its affiliated licensees have such a relationship, a disclosure of the nature of the relationship. For purposes of this division, "material relationship" means any actually known personal, familial, or business relationship between the brokerage or an affiliated licensee and a client that could impair the ability of the brokerage or affiliated licensee to exercise lawful and independent judgment relative to another client.

(5) That as a dual agent, the brokerage cannot engage in conduct that is contrary to the interests or instructions of one party or act in a biased manner on behalf of one party;

(6) A section specifying the source of compensation to the real estate broker;

(7) That the client does not have to consent to the dual agency relationship, and the options available to the client for representation in the transaction if the client does not consent, including the right of the client to terminate the agency relationship and seek representation from another source;

(8) That the consent to the dual agency relationship by the client has been given voluntarily, that the signature indicates informed consent, and that the duties of a licensee acting as a dual agent disclosed to the client pursuant to division (B) of this section have been read and understood.

(C) The disclosure requirements of this section do not apply in any of the following situations:

(1) The rental or leasing of residential premises as defined in section 5321.01 of the Revised Code, if the rental or lease agreement can be performed in eighteen months or less;

(2) The referral of a prospective purchaser or seller to another licensee;

(3) Transactions involving the sale, lease, or exchange of foreign real estate as defined in division (E) of section 4735.01 of the Revised Code;

(4) Transactions involving the sale of a cemetery lot or a cemetery interment right.

(D) The licensee is obligated to perform all duties imposed on a real estate agent at common law except to the extent the duties are inconsistent with the duties prescribed in this chapter or are otherwise modified by agreement.

Sec. 4735.58.  (A) A licensee acting as a seller's agent shall provide the seller an agency disclosure statement described in section 4735.57 of the Revised Code prior to marketing or showing the seller's property.

(B)(1) A licensee working directly with a purchaser in a real estate transaction, whether as the purchaser's agent, the seller's agent, or the seller's subagent, shall provide the purchaser with an agency disclosure statement described in section 4735.57 of the Revised Code prior to the earliest of the following events:

(a) Initiating a prequalification evaluation to determine whether the purchaser has the financial ability to purchase or lease the particular property;

(b) Requesting specific financial information from the purchaser to determine the purchaser's ability to purchase or finance real estate in a particular price range;

(c) Showing the property to the purchaser other than at an open house;

(d) Discussing, with the purchaser, the making of an offer to purchase real property;

(e) Submitting an offer to purchase or lease real property on behalf of the purchaser.

(2) If the earliest event described in division (B)(1) of this section is by telephone, the licensee shall make a verbal disclosure of the nature of the agency relationship that the licensee has with both the seller and the purchaser. The licensee shall obtain the purchaser's signature and the date on an agency disclosure statement at the first meeting with the purchaser following verbal disclosure of the agency relationship.

(3) A licensee acting as a seller's agent is not required to provide a purchaser with an agency disclosure statement except in the case of an event described in division (B)(1) of this section.

(C) A licensee who is a purchaser's agent or a seller's subagent working with a purchaser shall present the agency disclosure statement described in section 4735.57 of the Revised Code to the purchaser and request the purchaser to sign and date the statement pursuant to division (B) of this section no later than the preparation of an offer to purchase or lease, or a written request for a proposal to lease. The licensee shall deliver the statement signed by the purchaser to the seller's agent, or to the seller if the seller is not represented by an agent, prior to presenting the seller with either a written offer to purchase or lease, or a written request for a proposal to lease.

(D)(B) A licensee selling property at auction shall, prior to the auction, verbally disclose to the audience that the licensee represents the seller in the real estate transaction. The licensee shall provide the agency disclosure statement described in section 4735.57 of the Revised Code to the successful bidder prior to the bidder's signing a purchase contract.

(E)(C) Evidence that a licensee has failed to comply with this section constitutes prima-facie evidence of misconduct in violation of division (A)(6) of section 4735.18 of the Revised Code.

Sec. 4735.70.  The following are dual agents under this chapter:

(A) A licensee who represents both the purchaser and the seller as clients in the same real estate transaction;

(B) A brokerage that represents both the purchaser and the seller as clients in the same real estate transaction;

(C) A management level licensee who represents a client in an in-company transaction. If there is more than one management level licensee affiliated with the brokerage and either of the following applies, the management level licensee is not a dual agent:

(1) The management level licensee personally represents either the seller or the purchaser in a transaction, in which case the management level licensee will represent only the interests of that licensee's client.

(2) The management level licensee is the purchaser or seller in a transaction and will represent only that licensee's interest.

Sec. 4735.71.  (A) Except as provided in division (C) of this section, no No licensee or brokerage shall participate in a dual agency relationship described in section 4735.70 of the Revised Code unless both the seller and the purchaser in the transaction have full knowledge of the dual representation and consent in writing to the dual representation on the dual agency disclosure statement described in section 4735.73 4735.57 of the Revised Code. Before a licensee obtains the consent of any party to a dual agency relationship, the licensee shall disclose to both the purchaser and the seller all relevant information necessary to enable each party to make an informed decision as to whether to consent to the dual agency relationship. If, after consent is obtained, there is a material change in the information disclosed to the purchaser and the seller, the licensee shall disclose such the change of information to the purchaser and the seller and give them an opportunity to revoke their consent.

(B) The brokerage shall make the dual agency disclosure to both the seller and purchaser as soon as practicable after it is determined that such dual agency may exist. The parties to the real estate transaction shall sign and date the dual agency disclosure statement in a timely manner after it is determined that a dual agency relationship exists. The form must be signed and dated prior to the signing of any offer to purchase or lease the real estate that is the subject of the transaction.

(C) A brokerage that is a dual agent is not required to obtain the consent of the seller and the purchaser on the dual agency disclosure statement described in section 4735.73 of the Revised Code if the seller and purchaser are each represented by a different, nonmanagement level licensee who is affiliated with the same brokerage and all of the following conditions are met:

(1) The licensees made disclosures as required under sections 4735.56 and 4735.58 of the Revised Code;

(2) The potential for the formation of the dual agency was disclosed to all parties in the agency disclosure statement pursuant to section 4735.57 of the Revised Code;

(3) Each party consents by initialing, in a timely manner after it is determined that a dual agency relationship exists in the transaction, the section in the agency disclosure statement that discloses the potential for a dual agency relationship.

(D) No brokerage shall participate in a dual agency relationship described in division (C) of section 4735.70 of the Revised Code, unless each of the following conditions is met:

(1) The brokerage has established a procedure under section 4735.54 of the Revised Code under which licensees, including management level licensees, who represent one client will not have access to and will not obtain confidential information concerning another client of the brokerage involved in the dual agency transaction.

(2) The licensee who is an agent for each client in the dual agency relationship fulfills the licensee's duties exclusively to that client.

Sec. 4735.72.  (A) The brokerage and management level licensees in a brokerage in which there is a dual agency relationship described in divisions (A) and (B) of section 4735.70 of the Revised Code shall do each of the following:

(1) Objectively supervise the affiliated licensees in the fulfillment of their duties and obligations to their respective clients;

(2) Refrain from advocating or negotiating on behalf of either the seller or the purchaser;

(3) Refrain from disclosing to any other employee of the brokerage or any party or client, any confidential information of a client of which the brokerage or management level licensee becomes aware and from utilizing or allowing to be utilized for the benefit of another client, any confidential information obtained from a client.

(B) When two nonmanagement level licensees affiliated with the same brokerage represent separate clients in the same transaction, each affiliated licensee shall do both of the following:

(1) Serve as the agent of only the party in the transaction the licensee agreed to represent;

(2) Fulfill the duties owed to the respective client as set forth in this chapter and as agreed in the agency agreement.

(C)(1) In all cases, a management level licensee shall keep confidential information of the client or brokerage.

(2) Nothing in this section prohibits the brokerage or management level licensees in the brokerage from providing factual, nonconfidential information that presents or suggests objective options or solutions, or assisting the parties in an unbiased manner to negotiate or fulfill the terms of the purchase contract or lease, provided that confidential information of a client is not utilized in any manner in formulating such suggestions or providing such this assistance.

(D) No cause of action shall arise on behalf of any person against a licensee in a dual agency relationship for making disclosures to the parties that are permitted or required by this chapter, or that have been made on the dual agency disclosure statement. Making permitted disclosures does not terminate any agency relationship between a licensee and a client.

(E)(1) If a brokerage determines that confidential information of one client in a dual agency relationship has become known to any licensee employed by or affiliated with the brokerage who is representing the other client in the dual agency relationship, as a result of the failure of the brokerage, its licensees, or its employees to maintain such confidentiality, the brokerage shall do both of the following:

(a) Notify both clients of such the fact immediately in writing;

(b) Offer to resign representation of both clients.

(2) If either client elects to accept such the resignation, the brokerage shall not be entitled to any compensation from that client. If either client does not accept such the resignation, the brokerage may continue to represent that client.

(3) A licensee who obtains confidential information concerning another client of the brokerage in a dual agency relationship shall not, under any circumstances, disclose that information to or use that information for the benefit of the licensee's client.

(F) A client of a brokerage who is involved in a dual agency relationship may bring an individual action against a brokerage and any licensee who has failed to comply with the procedure described in division (D)(1)(B)(1) of section 4735.71 of the Revised Code to recover actual damages and to rescind an agency agreement with the brokerage.

Section 2. That existing sections 4735.53, 4735.58, 4735.70, 4735.71, and 4735.72 and sections 4735.56, 4735.57, and 4735.73 of the Revised Code are hereby repealed.